Bangladesh: Uncharitable Charities

SANCHITA BHATTACHARYA

Identifying and neutralising the sources of terrorist funding have become global concerns. The United States' Ambassador to Bangladesh, Dan W. Mozena, on December 10, 2014, asserted, "The terrorists who seek to destroy our communities of peace, diversity and tolerance have developed many avenues for generating money to fuel their vast machines of death...One source of financing terrorism and violent extremism is charity, the vast network of charitable organisations thrives across South Asia and we must fight back against it."

Echoing similar concerns, Bangladesh Law Minister Anisul Huq stated, as reported on December 10, 2014, that millions of dollars were collected every year in the name of benevolence and charitable activities but a portion of it, either by design or exploitation of organisational structure, is diverted to fund acts of terrorism. The fight against terrorism should be a global and collaborative effort so that charitable and Non-Government Organisation (NGO) activities do no turn into support for terrorism, he added.

Bangladesh has a history of involvement in money-laundering and terrorist financing cases. Interestingly, the Bangladesh Cabinet, on December 1, 2014, approved the draft of the much awaited Foreign Contributions (Voluntary Activities) Regulation Act, 2014, intended to regulate the flow of foreign aid being channelled to non-profit groups. The approval was given in the weekly meeting of the Cabinet held at the Bangladesh Secretariat, with Prime Minister Sheikh Hasina Wajed in the Chair. The proposed draft law is intended to ensure transparency, accountability, proper inspection, monitoring, evaluation and appropriate use of foreign funds by NGOs.

Cabinet Secretary M. Musharraf Hossain Bhuiyan subsequently stated, "No NGO will be able to run its activities without taking registration from the NGO Affairs Bureau. No registration is required in case of individuals, but approval has to be taken from the Bureau... The proposed law has also a provision for punishment, cancellation of registration and imposition of fines for violating the law".

The Act is supposed to be a comprehensive and wide ranging legal instrument to provide support and regulation of NGO activities. It has been prepared by integrating two previous legal instruments: The Foreign Donations Voluntary Activities Regulation Ordinance, 1978; and the Foreign Contributions Regulation Ordinance, 1982.

December 6, 2014, reports indicated that Bangladesh Bank, the country's central bank, had also asked commercial banks to take effective measures under the anti-money laundering and anti-terror financing laws to check illegal fund transfer and associated pecuniary offences. Bangladesh Bank Governor Atiur Rahman noted that money-laundering offences hindered the socio-economic development of the country: "Such risk will increase gradually if money laundering is not prevented effectively... Recently, different banks have been fined due to non-compliance with the KYC provisions."

The previous Money Laundering Prevention Act, 2012 and Anti Terrorism Amendment Act, 2013 also sought to regularise financial activities. The 2013 Act, provides capital punishment as highest penalty for terrorism and subversive activities. Further, it allowed the courts to accept videos, still photographs, and audio clips used in facebook, twitter, skype and other social media, as evidence. In December 2014, eight banks in Bangladesh were fined for not keeping client affidavits and not informing authorities of suspicious transactions in time. The banks include: Islami Bank, Premier Bank Limited, BRAC Bank, Mercantile Bank, Dutch-Bangla Bank, Southeast Bank, Uttara Bank and Bangladesh Investment Finance Corporation. They were slapped with fines ranging from Tk 200,000 to Tk 2 million under the law to prevent money laundering, Mohammad Mahfuzur Rahman, Deputy Head of the Bangladesh Financial Intelligence Unit (FIU) disclosed.

In order to extract information on money laundering by various elements, the Anti Corruption Commission (ACC), in the month of November 2014, sent Mutual Legal Assistance Requests (MLAR) to 14 countries, for information regarding alleged money laundering by the country's businessmen, politicians, industrialist, and government officials. However, ACC Secretary M. Maksudul Hasan Khan did not disclose the names of the 14 countries and the suspected money launderers.

Bangladesh has long been plagued by illicit financial transfers from both national and international sources. It is suspected that militants regularly tap into these illegal money flows to fund their operations. Money laundering is also a prime way of generating funds. Remittances from expatriate Bangladeshis working in the Middle East, the United Kingdom and elsewhere, are a further area of concern. There is a broad consensus that such techniques are used by militant organisations. One of the most significant links to funding from the Diaspora was uncovered in March 2009, when a madrasa (Islamic seminary) in Bhola District in southern Bangladesh was raided by an anti-terrorist unit, which seized 10 firearms, 2,500 rounds of ammunition and radical Islamic literature. Subsequent investigations revealed that the madrasa was funded by the British-registered charity Green Crescent.

Further, the Saudi Arabia-based al-Haramain Islamic Foundation, banned internationally by United Nations Security Council (UNSC) Resolution 1267, along with other charities from the Middle East, is infamous for financing terrorism in Bangladesh. NGOs and charities, such as the Kuwait-based Revival of Islamic Heritage Society (RIHS) and the Saudi Arabian Hayatul Igachha (HI), have also been linked to Islamist extremism in the country.

The Islami Bank Bangladesh Limited (IBBL) reportedly handled accounts of various Wahhabi organisations, that propagate radical Islam in the country. In 2011, the Bangladeshi Home Ministry intelligence revealed that eight per cent of the Bank's profits were diverted to support jihad in Bangladesh. Another sharia bank, Social Islami Bank, worked with HSBC. In 2011, the US Senate implicated HSBC for disregarding evidence of terror financing at the Social Islami Bank.

More recently in February 2014, UNSC provided definite information that al Qaeda network was active in Bangladesh. The UN has indicated that two NGOs, Global Relief Foundation and al-Haramain Islamic Foundation, working in Bangladesh, were involved with al Qaeda.

In a positive initiative, the Shiekh Hasina-led Government is not only trying to monitor and regulate NGO-related funding channels and activities, but, at the same time, is also looking into the bigger picture of financial fraud and terror connections. The existence of financial networks related to the infrastructure of terrorism in Bangladesh constitute a serious threat not only to the country itself, but to the stability of the wider region as well.

First published in South Asia Intelligence Review, Weekly Assessments & Briefings, Volume 13, No. 24, December 15, 2014

Sanchita Bhattacharya is Research Associate, Institute for Conflict Management, India

How to Rob a Bank in Bangladesh

Tahmima Anam

In Bangladesh, we sometimes play We Also Have. This is a parlor game in which we can say, with pride, that we now have the things that could previously be found only in other countries.

In the 1990s, it was satellite television (we also have MTV!); in the 2000s, it was shopping malls and high-rise buildings and multiplex cinemas. This year, it was a Hollywood-style bank heist.

In January, a man going by the name of Sohel and his accomplice Idris successfully stole 169 million taka (about $2.2 million) from a branch of Sonali Bank in Kishoreganj, 70 miles north of the capital, Dhaka.

Although “Sohel,” later identified as Yusuf Munshi, his brother Idris Munshi and a number of other accomplices were arrested within days of the robbery, it was all anyone could talk about for weeks afterward. We devoured the details of the heist: how Mr. Munshi had plotted for two years to rob the bank, how he had rented a house next door and dug a 30-foot tunnel to reach the bank’s vault.

It was even reported that he had had an affair with a bank employee as part of his scheme. Social media exploded with comparisons with Hollywood movies such as “The Bank Job.”

It appears Mr. Munshi has started a trend. In March, 3 million taka (about $40,000) was stolen from Sonali Bank’s Adamdighi branch in Bogra, when thieves used the same technique — digging a tunnel into the vault from a nearby furniture shop. And last month, criminals made away with almost 20 million taka ($260,000) from a Brac Bank branch in the small town of Joypurhat by boring a hole from a neighboring building. When renting the office next door, the robbers had claimed to be starting a nonprofit agency called Poor Development. Oh yes, in Bangladesh, we also have irony.

But while our attention is drawn to this proliferation of movie-style heists, the larger irony is that Mr. Munshi and his copycat criminals are not the real bank robbers. No, the bigger thieves are hiding in plain sight, and sanctioned by the banks themselves. They are the loan defaulters: people and businesses who borrow money from banks with no intention of repaying the debt.

The problem, it seems, is the way Bangladesh’s banking sector is organized. There are broadly two types of banks: private banks, which are overseen by the central bank, and state-run commercial banks, which fall directly under the aegis of the Finance Ministry. While private banks have had their share of loan defaulters (sometimes those who sit on the boards of these banks), it is overwhelmingly the state-run banks that have allowed bad loans to multiply to an unsustainable degree. The international standard for loan defaults is currently at about 2 to 3 percent. In Bangladesh, it is over 12 percent. In a recent study conducted by the Bangladesh Institute of Bank Management, the percentage of nonperforming loans in state-run banks is as high as 29 percent.

The situation is only getting worse. The World Bank’s 2013 Bangladesh Development Update states that “weak internal controls, poor corporate governance, and slackening of credit standards resulted in irregularities in loan approvals,” which caused state-run commercial banks to classify more than half a billion dollars’ worth of loans as “nonperforming.” In the past six years, the four major state-run banks have seen sharp spikes in defaulted loans; the total amount of credit in default held by these four banks is about $2.45 billion (not including nearly $2 billion already written off).

This means that an enormous amount of capital is taken out of the banking system, and banks must compensate for this loss by keeping interest rates high. Currently, Bangladeshi banks’ interest rates range between about 9 percent and 16 percent, while deposits earn between 6 percent and 12 percent.

There is much talk about the government’s attempting to crack down on defaults. The new chairman of Basic Bank, one of the worst culprits with outstanding loans of over $1.45 billion, has publicly named and shamed a list of the top 100 loan defaulters. The bank has attempted to recover some of the bad debt, but has thus far been largely unsuccessful. Ultimately, there appears to be little legal recourse because the justice system is overwhelmed: There are more than 800,000 cases against loan defaulters pending in the courts.

The only way to alter this broken system is for the state-run banks to come under the control of a single body that is entirely separate from the executive branch of government. Having a set of banks that are controlled by political appointees, which report directly to the Finance Ministry and run no risk of being audited by impartial agencies, will always result in a corrupt system.

When the rather terrifyingly named Rapid Action Battalion recovered the money that the Munshi brothers had stolen from Sonali Bank, about 20 million taka was missing. Yusuf Munshi claimed to have spent the money buying a truckload of rice for a local religious leader. That money was never found.

Since the Munshis’ heist, the Bangladesh Bank has suggested that banks beef up their security, and yes, it sounds as though their vaults could use some more cement. But while we can barricade bank branches themselves, we need to step up efforts to stop those who steal from within, the sharp-suited businessmen who raid our banks in broad daylight.

First published in International Herald Tribune, October 10, 2014

Tahmima Anam, a writer and anthropologist, is the author of the novel “A Golden Age.”

Despite global downturn: Bangladesh's GDP has grown at an average of 6.3% per annum

SUBIR BHAUMIK

US secretary of state Henry Kissinger had dismissed Bangladesh as a "perpetual economic basket case" almost immediately after it was born. Spite, more than anything else, may have influenced the remark as the birth of Bangladesh was "raw chilly to wounds" sustained by the US in Vietnam.

Washington could only blame itself for supporting Yayha Khan's blood-thirsty military junta in one of the worst genocides in recent history — but unlike China that quickly got over the same hangover for Pakistan and developed relations with Bangladesh, regardless of the party in power, the US could never come to terms with the Awami League that had spearheaded the fight for the country's independence from Pakistan.

But Bangladesh has proved Kissinger wrong with a vengeance. In the last five years, its GDP has grown at an average of 6.3% per year, in the midst of one of the worst global downturns in recent times. It has achieved its 2015 UN Millennium Development Goals two years in advance. In 2013, it had brought the number of poor to less than 30% of its population — a target set for 2015 by the UN. In most indices of human development, especially gender-related, Bangladesh has surged miles (in some cases, yards) ahead of India and other south Asian nations.

When India is unable to manage its spiralling current account deficit, Bangladesh sits on a comfortable current account surplus of $2.57 billion for the first time in its independent history. Its revenue collection has risen threefold over the last five years and its tax-GDP ratio has increased to 13.5% from 10.8% during the period. The Awami League, which has been in power since January 2009, has good reasons to take credit for its management of the economy.

WAR CHEST SWELLS WITH PRIDE

The foreign currency reserves at the Bangladesh Bank have crossed the $16-billion mark, enough to meet import costs of five months. Export earnings have soared to over $27 billion from $10 billion in the last five years. Bangladesh also witnessed a buoyant remittance flow with the amount nearly touching $15 billion.

With its expatriates largely from the working class, the tendency is to send a lot of money back home to buy assets for the future as they plan to return home rather than settle overseas. So, regardless of the political turmoil back home, most Bangladeshis abroad believe in a future for south Asia's youngest nation.

For the first time, foreign direct investment has topped the $1-billion mark. It was $1.3 billion in the 2012-13 fiscal year. Foreign aid flow has also increased substantially.

However, the agriculture sector has witnessed a decline and investment in the private sector has fallen too, as the State of Economy report published by the Planning Commission in September 2013 indicates. In fiscal year 2005-06, the agriculture sector grew 4.9%. But that came down to 2.2% in the last fiscal year primarily because fresh acreage could not be added to agriculture due to lack of irrigation and other infrastructure.

But due to successive bumper harvests, production has gone up and the food import bill has dropped by as much as 16%. Food prices have risen by only 2.8% this fiscal year. This has helped to boost forexreserves. The growth of the services sector has dropped to 5.7% from 6.4%, the report said. But that is attributed to lack of investment, primarily because of the disturbed political situation in the country.

DAVID BEATS GOLIATH, AGAIN

A year ago, the Bangladeshi Taka (BDT) was selling at 84 to a US dollar. It is now between 77 and 78. In the same period, the Indian rupee has fallen over 15%: from 47-48 to a dollar to 61-62. In fact, currency traders predict that another nosedive by the rupee and it would be nearly at par with the taka. That may not be good for Bangladesh that seeks to boost exports, but it does indicate the strength of the economy.

When Prime Minister Sheikh Hasina lost patience with the World Bank, withdrew the funding request to the global lender and decided to fund the $2.9-billion rail-road bridge on the mighty Padma river, she made a huge statement of national confidence. It is not easy for Bangladesh, once so dependent on foreign aid, to tell the World Bank to pack up.

BRIDGE ON THE RIVER PADMA

Then Hasina refused offers from China and Malaysia to fund the 6.15-km bridge — the Malaysian terms were not attractive and Chinese entry would have upset India. But Hasina reasoned that sovereign bonds offering interest a little higher than bank deposits would easily fetch expatriate funds because the remittances were flowing. Finance minister AM A Muhith has already placed taka 68 billion ($0.88 billion at current exchange rates), or about a third of the total cost of the Padma project, in the current 2013-14 national budget.

That is some statement of financial confidence. Bangladesh, despite her political turmoil and uncertainties over the next parliamentary polls, seems well on its way to become a middle-income nation before the end of the decade.

First published in The Economic Times, 20 Sep, 2013

Subir Baumik is a writer, a veteran journalist, is now senior editor with Dhaka-based bdnews24.com